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KPMG: Considered approach required when exploring opportunities in Africa

By BusinessNews Staff on October 31, 2012

For businesses to succeed in Africa, they need to recognise the diverse nature of African regimes.

This emerged at KPMG’s Africa Conversation, “Investing in Africa: ‘been there-done that”, convened at the professional services firm’s 2012 Africa Partners’ Conference being held in the Eastern Cape, South Africa. The conference draws all partners operating across the African markets.

“Different regimes mean different tax regimes, different markets, different corporate governance [requirements]; so it’s not possible to see the continent as one simple market,” said KPMG’s Global Chairman, Michael Andrew. “It’s important to ensure there are localised services in each one of those different markets and develop the right models that respond to that.” There also need to be local management teams that respond to those dynamics.

In addition, Tongaat Hulett CEO, Peter Staude, pointed to the importance of acknowledging the needs and roles of local communities as stakeholders within the areas in which businesses operate. “In agri-processing, we operate in rural communities. One can’t treat a rural community the way you treat a corporate, where one can consult with a board or CEO. We need to know who to interact with. If we can’t get those elements right in our industry, we can’t make progress… it can be a battle.

“The need is multi-faceted. We have to deal with all the underlying issues [in a local context] and all the stakeholders. That’s one big lesson we’ve learned over the last ten years [in expanding across the SADC region].”

At a macro-level, factors such as steady population growth and increasing disposable income will act as strong drivers for African growth, leading to greater interest and less caution around investing in the continent over the next five to 10 years, said Marlon Chingwede, MD of the sub-Saharan Africa unit at asset management firm Carlyle Group. Carlyle recently established a presence in Johannesburg and Lagos and is monitoring the quality of African economic growth. “Two-thirds of our growth in Africa’s six percent GDP has come from increasing domestic consumption. One-third of that has been commodities-related,” he added.

However, corruption on the continent has the potential to dent investor confidence if left unchecked. In particular, corruption in the public sector has a serious impact on foreign investor confidence.

A bottom-up strategic understanding blended with acknowledging a top-down approach will help unlock the economic potential of the continent as it rises in confidence and prosperity, the conference was told. “In Africa, I see a real drive from people to find the opportunities to improve their countries, which I don’t see as obviously or consistently in other countries around the world,” said Andrew.

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